By: Samuel Iden


The world of real estate involves many walks of life buying or selling for a wide variety of reasons.  For these parties to complete their transactions they must first execute contracts, commonly accomplished using a standard form Offer to Purchase provided by their licensed North Carolina real estate agents.  One of the requirements for a party to enter a valid contract is capacity.  A minor is, generally speaking, one example of a party lacking contractual capacity.  Let’s look further at diminished capacity, a topic you’re more likely to encounter in the world of real estate.

It isn’t unusual for mom and dad to decide to sell when the time is right to move into assisted living or the home of a caretaking loved one.  A decline in health often precedes such a decision.  What should real estate professionals be considering when that decline involves mental health?

The type of decision being made matters when it comes to the standard for capacity.  For someone to create or revise a will, that person need only have testamentary capacity.  To execute a real estate contract that person will need contractual capacity, which is a higher standard.  Courts generally assess the ability of a person to understand the nature and effect of entering into the real estate contract and subsequently executing a conveyance of title at closing.

The cognitive, emotional and behavioral functionality observed when interacting are keys to determining if diminished capacity could be an issue.  Repeating the same question(s), forgetting topics covered, illogical reasoning, confusion about the current time (e.g. day, month, year), unusual emotional reactions, misperceptions and/or paranoia are examples of observations suggesting diminished capacity could be an issue.

When the totality of factors indicates the presence of diminished capacity it can still be possible to complete the real estate transaction by establishing a guardianship, although there are additional cost and time considerations involved.  A guardianship is implemented through the courts and can be limited in nature to align appropriately with levels of competency and functionality.  Jackson Law has attorneys on staff who are able to assist clients with establishing a guardianship, when appropriate.

With this knowledge, now you can Rest Easy.